The undersupply of criticism

by Ajay Shah.

There is an undersupply of criticism

Freedom of speech, and trenchant criticism, is central to civilisation. Too often, people jump to the conclusion that in communist China there is no freedom of speech, but in democratic India, all is well. This represents an underestimation of how hard it is, to get to freedom of speech.

The people who are supposed to speak up maximise for themselves and not for society. The costs of being a critic -- by being at the receiving end of hostility from a government or a corporation or a powerful individual -- are paid by the individual. The benefits of having a critic mostly accrue to society at large and are not captured by the critic. The individual engages in criticism upto the point where personal benefits are balanced against personal costs. The solution to this optimisation is a point where the production of criticism is too low, from the viewpoint of society at large.

All of have a rough sense of how this is supposed to work out. A person speaks up, offends the rich and powerful, gets into trouble. Here is an example of that trajectory - a story by Andy Mukherjee about how Lim Teck Ghee lost his job, and here is contentSutra on these classic threats to freedom of speech. I was at the receiving end of three criminal defamation cases by MCX and MCX-SX (in Bombay, Kolhapur and Surat); these cases only ended after the ownership of MCX and MCX-SX changed in the wake of the NSEL scandal.

There are three interesting angles in this problem, going beyond these simple direct attacks on freedom of speech.

I. Official cooperation that corrupts

A Western researcher invests his entire human capital in China studies. But to produce papers on China critically requires cooperation from the Chinese government. Hence, the incentives which apply at the level of the individual lead to an undersupply of criticism.

Read Emily Parker, in the New York Times, on how the world is engaged in self-censorship when it comes to China. In this context, it is worth reading Have all China scholars been bought? by Carsten A. Holz in the Far Eastern Economic Review (we loved thee well) from April 2007.

For a striking contrast, look back at Sovietology, which was done without cooperation from the communist regime. There, the supply of criticism was plentiful since the unhappiness of the USSR did not influence the intellectuals. I do believe that played a role in shaping the minds of people like Andrei Sakharov or Nadezhda Mandelstam, and that made all the difference.

A critic of China would say: Where is your Andrei Sakharov? One Chinese response would be: Where is your `Darkness at noon'?, for part of the answer lies in the treason of the intellectuals in the West.

On a similar note, a journalist who covers a beat has human capital that's specific to the beat. E.g. a person develops specialised knowledge about telecom and covers telecom. If DoT/TRAI threaten to yank his access, this is career destroying. This puts journalists in a position where it is personally very costly to criticise government organisations which are capable of such unpleasantness. This creates a bias in favour of positive media coverage of the government organisations who engage in such unpleasantness. Similar issues apply with academic researchers also. To be a researcher on NREGS you have to be friends with the Ministry of Rural Development.

As an example, it is hard to do monetary economics in India without cooperation from RBI. Hence, most money/banking economists and journalists in India do not criticise RBI. As an example, on 7 December 2016, RBI blocked two journalists from their press conference that unveiled the monetary policy announcement. This is one episode in which the information spilled out, but such actions against journalists have been undertaken many times before by RBI. This was perhaps a response by RBI to the trenchant criticism by these two gentlemen in previous days. RBI's action hurts the careers of these two brave people. How do you think their employers will respond, if it's known that these two persons no longer have access to meetings at RBI? Most journalists internalise this threat to their careers, and the banking/finance beats of all newspapers are uniformly supportive of RBI.

II. Profit maximising firms have little commitment to enlightenment values

The second dimension of this problem is the difficulties faced by private firms and their employees. Barring Google, all large Western firms have cooperated with the Chinese communist party. When faced with a hostile State, the firm focuses on profit maximisation and forgets about enlightenment values.

I noticed this paragraph in an article Foreign Companies Chafe at China's Restrictions also in the New York Times by Keith Bradsher:

``They say, `Don't show us broken models; we're looking for a completely different way,' and you see a much greater willingness to experiment with completely untested policies,'' said a senior executive at a multinational who insisted on anonymity for fear of retaliation by Chinese regulators.

This highlights the atmosphere of fear which shapes information and opinions about China in the public domain.

In India, employees of RBI-regulated firms do not have the freedom of speech to criticise RBI. RBI controls a large number of levers in a non-rule-of-law environment [example], which are used to punish the people who criticise RBI. This creates fear among practitioners, and people who might in the future work in a RBI-regulated firms tend to practice self-censorship. This yields an environment of diminished discussion which hampers sound decision making by RBI.

III. Blackmail by a surveillance state

The third dimension is related to the larger problems of privacy and protection of the individual. Every critic has personal foibles. A society in which the government has ample information about critics is one in which a critic can be blackmailed by the government. This is one factor generating docility amongst intellectuals in China.

As Janet Reitman says in the Rolling Stone:

... whistle-blowers are almost always complex, often compromised outliers. And while moral outrage surely plays a large part in a whistle-blower's decision to come forward, so may a combination of anger, revenge, hurt feelings, opportunism or financial benefit. The question, ultimately, is whether their questionable motivations or checkered past make their words any less credible.

India is rushing headlong into an environment where the government controls vast amounts of information about citizens (all neatly indexed by a single key, the UID). When cash is replaced by digital payments, the government obtains tremendous amounts of information about the activities of each citizen. Developments like Aadhaar, Digital payments, FIU, etc. should be accompanied by a tremendous emphasis on privacy.

We should think twice about these developments, for they could threaten the foundations of democracy. If information comes into the hands of a capable bureaucracy before there are deep roots in civil liberties, the trajectory of a country could go badly wrong.

Genuine freedom of speech is hard to achieve

We often think freedom of speech is a natural state, particularly for us argumentative Indians. But genuine freedom of speech is actually a difficult state to achieve, since relatively small threats and abuse of power are enough to stifle criticism. We need to, hence, go out of our way to strengthen the position and personal incentives of critics.

Conversely, when a country steps out from dictatorship and tries to become a democracy, this is truly hard. It has taken many decades for India to build up to the existing half-decent quality of public discussion. This soft infrastructure, of the checks and balances of liberal democracy, is hard to achieve. It can easily be choked off if more power is amassed by the State apparatus and enlightenment values lack deep roots.

Goverment versus individual, Singapore versus India: Examples

A few years ago, the Singapore government got unhappy about some remarks by a Morgan Stanley analyst named Andy Xie. They forced the firm to sack him. The offending text -- from a personal email that he wrote -- was:

The dinner was turned into an Oprah with PM Lee Hsein Long (sic) at the center. The topic was on the future of globalization. People fawned him like a prince. Of course, he is. There are two reigning princes in the world that the Davos crowd kiss up to, Jordan and Singapore. The Davos crowd are Republican on economic issues and democratic on social issues. Somehow they manage to put aside their moral misgivings and kiss up to Lee Hsein Long and Abdullah. 

I tried to find out why Singapore was chosen to host the conference. Nobody knew. Some thought it was a strange choice because Singapore was so far from any action or the hot topic of China and India. Mumbai or Shanghai would have been a lot more appropriate. ASEAN has been a failure. Its GDP in nominal dollar terms has not changed for 10 years. Singapore's per capita income has not changed either at $25,000. China's GDP in dollar terms has tripled during the same period. 

I thought the questioners were competing with each other to praise Singapore as the success story of globalization. Actually, Singapore?s success came mainly from being the money laundering center for corrupt Indonesian businessmen and government officials. Indonesia has no money. So Singapore isn't doing well. To sustain its economy, Singapore is building casinos to attract corrupt money from China.

On a related note, see this treatment of attempts by the Singapore government to make difficulties for Far Eastern Economic Review. Or, this strange treatment about a GDP forecast.

It is useful to compare this against a story from India from September 2001. At the time, Joydeep Mukherjee worked on India rating for Standard and Poors. He gave an interview to Outlook magazine which harshly criticised the Indian government, with text such as:

On paper, India has liberalised its investment policies a great deal. In practice, it has not. Attitudes have barely changed. The visible barriers to foreign investment have been reduced but not the 'invisible' ones. The hassles, time-consuming procedures, and petty license and permit-raj that thrives at the local level are still a huge obstacle. India has made some progress towards `one-window approval' but there is no `one-window bribe' that can finally clear a project and allow the promoters to proceed without repeated requests for more bribes, and unlimited delays.
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Foreign investment is seen by local officials and politicians as one more source of illegal income and thus receives all the attention that predators give to easy prey.
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Argentina, Brazil, even Egypt are way ahead, and let's not even talk about China. Botswana gets more foreign investment than India. In a competitive world, you have to meet global standards to win. Indians are not ready to accept this. They are used to inferior Indian standards developed over 50 years of economic isolation from global currents. It does not matter if policies toward foreign investment are better today than they were a decade ago in India. What matters is how they compare with policies in other countries. The ghost of the East India Company is alive and well in modern India, which still has a schizophrenic attitude towards opening up to foreigners. Politicians in other countries take credit for bringing foriegn investment to their country because it creates jobs and wealth. Which Indian politician is willing to publicly defend a foreign investment project in India when it comes under attack from the swadeshi and the leftist crowd? They are happy to seek bribes from foreign projects but will not speak in their favor when needed.
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It is not just cowardice but also the reality that India is still in two minds about dealing with foreigners. Other countries have made up their minds, which is why they are getting more foreign investment.
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The public sector has become a milch cow for politicians, bureaucrats, and corrupt businessmen. It collects money from the country at large through taxes and distributes a growing share of it to these three groups. This unholy trinity is blessed by ideologues of the Left and the Right, allegedly because it is good for the poor or good for India's soul. Privatisation threatens the core of this system, which is why it has been successfully delayed and now made almost irrelevant.

Joydeep's arguments were well-known to people in India but they were harsher and more direct than what most analysts say about India in public. Many people in the Ministry of Finance felt that these words were indiscreet for someone analysing India for a rating agency, who had special access to the policy establishment by virtue of working on India rating. It was felt that an implicit quid pro quo -- of access to policymakers and information in return for silence in the public domain -- had been violated.

The government reacted by complaining directly to the top of the agency. The government did not ask for his sacking but complained about him, saying that his publicly aired views were inappropriate. It was the Ministry of Finance that complained, not the prime minister or someone in the political world. As a result, Joydeep was taken off Indian rating. He was not sacked.

The actions by the government were undertaken by the senior officials, both bureaucrats and Minister, of that time. Subsequent Ministers and bureaucrats simply worked with S&P, and its analysts, and the original disputed matter did not resurface as an irritant. The institutional ties between the government and the international financial market were maintained, regardless of the problems that arose between any individual analyst and government officials.

I feel that what worked was the stated and unstated rules, in a democratic framework, which shape the behaviour of the MoF staff. In India, negative information about the country is routinely debated in public and is not a shame or a state secret. Hence, Indian officials only think of criticising foreign analysts on questions of fact: highlighting errors or inappropriate statements. They don't simply ask them to avoid all negative statements about India.

At an individual level, MoF staff continued to meet Joydeep informally, without fear of disgrace or embarassment, as might have been the case in an authoritarian system. The issues raised in the controversial magazine interview remain relevant and have not been buried.